PRESIDENT Barack Obama (pictured) laid out a nightmarish vision of a US debt default yesterday, warning his Republican opponents of dire consequences if Congress failed to raise the debt ceiling, including "haywire" financial markets and a spike in interest rates that would shatter business confidence.
In a political broadside delivered at a surprise press conference at the White House, the president said he would not negotiate with Republicans over raising the $16.4 trillion (€12.25tn) debt limit, accusing them of risking "blowing up" the US economy because of their "absolutist" positions on spending.
"They will not collect a ransom in exchange for not crashing the American economy," Mr Obama declared. "The financial well-being of the American people is not leverage to be used. The full faith and credit of the United States of America is not a bargaining chip."
The president's move came as a number of leading voices in the Republican-controlled House of Representatives suggested that Republicans were prepared to let the US default in order to force deep spending cuts on the White House.
Republicans are demanding a dollar of spending cuts for every dollar of additional debt they authorise, a move that Mr Obama said would choke much-needed growth and limit America's ability to invest in the education, science and infrastructure needed to guard its future.
"We've got to break the habit of negotiating through crisis over and over again," Mr Obama added, recalling how the last time the US Congress fought over raising the debt ceiling in 2011, the US suffered its first-ever debt downgrade by ratings agencies.
Mr Obama said that he had already agreed to a total of $2.5tn (€1.8tn) in cuts and additional revenues over the next 10 years. However, he added he absolutely would not tolerate the linkage of the wider debate on fixing America's finances with raising the debt-ceiling.
"What I will not do is to have that negotiation with a gun at the head of the American people," he said. "Investors around the world will ask if the United States of America is in fact a safe bet. Markets could go haywire.
"Interest rates would spike for anybody who borrows money, every homeowner with a mortgage, every student with a college loan, every small business owner who wants to grow and hire," he said. (© Daily Telegraph, London)